Ways of managing risk have to change as mutual fund industry grows, say experts

Promoters borrowing from the mutual fund industry have recently come under public scrutiny in light of the fall in shares that are often pledged as collateral for such loans. After Zee promoters, the Anil Dhirubhai Ambani Group has become the next corporate entity to reach an agreement with lenders. These agreements throw up many questions: how should these instruments be rated, how should they be valued, and more importantly how much money has been lent to such entities both by the NBFCs and the mutual fund industry and can the risk aversion now derail debt markets and equity markets?

Industry experts say promoters are largely funded by mutual funds and non-banking financial companies, and, as the industry grows, the ways to manage risks should also be changed.

“As the time evolves, the way we manage the risk has to undergo a change,” said A Balasubramanian, CEO of Aditya Birla Sun Life AMC.